Price hikes at Walt Disney's streaming video services open the door for Netflix to increase its prices to bolster its profitability, an analyst says. Netflix stock rose Wednesday.
Disney on Tuesday announced that it is raising prices for all stand-alone tiers of Disney+, Hulu and ESPN+ in the U.S. this fall, as well as for most of its bundles. The higher prices will take effect on Oct. 17.
The ad-supported tier of Disney+ is rising $2 a month to $9.99. Disney+ Premium (no ads) is also going up by $2 to $15.99. Hulu with ads will cost $9.99 a month (up $2) and the ad-free Hulu is going up by $1 to $18.99 a month. ESPN+ will increase by $1 to 11.99 a month.
Jefferies analyst James Heaney said he thinks Netflix will use Disney's move as an opportunity to raise prices as well.
"Price hikes across Disney's streaming services validate our view that Netflix is likely due for a Standard Plan price hike (last Jan. '22), with NFL Christmas Games and 'Squid Game' (season two) upcoming," Heaney said in a client note Wednesday.
Heaney rates Netflix stock as buy with a price target of 780.
On the stock market today, Netflix stock rose 0.3% to close at 611.48.
Netflix Stock Ranks First In Industry Group
Netflix stock peaked at 697.49 on July 5 ahead of the company's second-quarter earnings report. However, Netflix shares fell after the Los Gatos, Calif.-based company offered a soft revenue outlook for the third quarter.
Netflix is likely to raise prices for its standard, ad-free tier in the fourth quarter, Heaney said.
He believes Netflix will keep its ad-supported tier at $6.99 a month as it builds out its advertising viewership base, now estimated at over 50 million monthly active users.
However, recent price increases of ad-supported plans at Disney, Comcast's Peacock and Paramount Global's Paramount + could lead to a "sooner-than-expected price hike" for Netflix's ad-based tier in 2025, Heaney said.
Netflix stock ranks first out of 20 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 96 out of 99.
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